Tax II Cases_additional.doc

7/25/2019 Tax II Cases_additional.doc

http://slidepdf.com/reader/full/tax-ii-casesadditionaldoc 1/23

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 106041 January 29, 1993

BENGUET CORPORATION, petitioner,

vs.

CENTRA BOAR! O" ASSESSMENT APPEAS, BOAR! O" ASSESSMENT APPEAS O"

#AMBAES, PRO$INCIA ASSESSOR O" #AMBAES, PRO$INCE O" #AMBAES, an%

MUNICIPAIT& O" SAN MARCEINO, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

CRU#, J.:

The realty tax assessent involved in this case aounts to P!!,"!#,"$%.$$. &t has been iposed on the

petitioner's tailin(s da and the land thereunder over its protest.

The controversy arose in !#)* +hen the Provincial Assessor of abales assessed the said properties

as taxable iproveents. The assessent +as appealed to the Board of Assessent Appeals of the

Province of abales. -n Au(ust %, !#)), the appeal +as disissed ainly on the (round of the

petitioner's /failure to pay the realty taxes that fell due durin( the pendency of the appeal./

The petitioner seasonably elevated the atter to the Central Board of Assessent Appeals, 1 one of the

herein respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the appeal but, on

the merits, agreed that "the tailings dam and the lands submerged thereunder (ere! subect to realt# ta$."

0or purposes of taxation the da is considered as real property as it coes +ithin the

ob1ect entioned in para(raphs 2a3 and 2b3 of Article %!* of the Ne+ Civil Code. &t is a

construction adhered to the soil +hich cannot be separated or detached +ithout brea4in(

the aterial or causin( destruction on the land upon +hich it is attached. The iovable

nature of the da as an iproveent deterines its character as real property, hence

taxable under 5ection ") of the Real Property Tax Code. 2P.6. %7%3.

Althou(h the da is partly used as an anti8pollution device, this Board cannot accede to

the re9uest for tax exeption in the absence of a la+ authori:in( the sae.

xxx xxx xxx

;e find the appraisal on the land suber(ed as a result of the construction of the tailin(s

da, covered by Tax 6eclaration Nos.

$$8$7$ and $$8$77, to be in accordance +ith the 5chedule of Mar4et <alues for



abales +hich +as revie+ed and allo+ed for use by the Ministry 26epartent3 of

0inance in the !#)!8!#) (eneral revision. No serious attept +as ade by Petitioner8

Appellant Ben(uet Corporation to ipu(n its reasonableness, i.e., that the P*$.$$ per

s9uare eter applied by Respondent8Appellee Provincial Assessor is indeed excessive

and unconscionable. =ence, +e find no cause to disturb the ar4et value applied by

Respondent Appellee Provincial Assessor of abales on the properties of Petitioner8Appellant Ben(uet Corporation covered by Tax 6eclaration Nos. $$8$7$ and $$8

$77.

This petition for certiorari no+ see4s to reverse the above rulin(.

The principal contention of the petitioner is that the tailin(s da is not sub1ect to realty tax because it is

not an /iproveent/ upon the land +ithin the eanin( of the Real Property Tax Code. More

particularly, it is claied >

2!3 as re(ards the tailin(s da as an /iproveent/?

2a3 that the tailin(s da has no value separate fro and independent ofthe ine@ hence, by itself it cannot be considered an iproveent

separately assessable@

2b3 that it is an inte(ral part of the ine@

2c3 that at the end of the inin( operation of the petitioner corporation in

the area, the tailin(s da +ill benefit the local counity by servin( as

an irri(ation facility@

2d3 that the buildin( of the da has stripped the property of any

coercial value as the property is suber(ed under +ater +astes fro

the ine@

2e3 that the tailin(s da is an environental pollution control device for

+hich petitioner ust be coended rather than penali:ed +ith a realty

tax assessent@

2f3 that the installation and utili:ation of the tailin(s da as a pollution

control device is a re9uireent iposed by la+@

23 as re(ards the valuation of the tailin(s da and the suber(ed lands?

2a3 that the sub1ect properties have no ar4et value as they cannot be sold

independently of the ine@

2b3 that the valuation of the tailin(s da should be based on its incidental

use by petitioner as a +ater reservoir and not on the alle(ed cost of

construction of the da and the annual build8up expense@

2c3 that the /residual value forula/ used by the Provincial Assessor and



adopted by respondent CBAA is arbitrary and erroneous@ and

2"3 as re(ards the petitioner's liability for penalties for

non8declaration of the tailin(s da and the suber(ed lands for realty tax purposes?

2a3 that +here a tax is not paid in an honest belief that it is not due, no

penalty shall be collected in addition to the basic tax@

2b3 that no other inin( copanies in the Philippines operatin( a tailin(s

da have been ade to declare the da for realty tax purposes.

The petitioner does not dispute that the tailin(s da ay be considered realty +ithin the eanin( of

Article %!*. &t insists, ho+ever, that the da cannot be sub1ected to realty tax as a separate and

independent property because it does not constitute an /assessable iproveent/ on the ine althou(h

a considerable su ay have been spent in constructin( and aintainin( it.

To support its theory, the petitioner cites the follo+in( cases?

!. Municipality of Cotabato v. Santos (1! "#il. $%', +here this Court considered the di4es and (atesconstructed by the taxpayer in connection +ith a fishpond operation as inte(ral parts of the fishpond.

. Bislig Bay umber Co. v. "rovincial )overnment of Surigao (1 "#il. ', involvin( a road

constructed by the tiber concessionaire in the area, +here this Court did not ipose a realty tax on the

road priarily for t+o reasons?

&n the first place, it cannot be disputed that the o+nership of the road that +as

constructed by appellee belon(s to the (overnent by ri(ht of accession not only

because it is inherently incorporated or attached to the tiber land . . . but also because

upon the expiration of the concession said road +ould ultiately pass to the national

(overnent. . . . &n the second place, +hile the road +as constructed by appellee

priarily for its use and benefit, the privile(e is not exclusive, for . . . appellee cannot

prevent the use of portions of the concession for hoesteadin( purposes. &t is also duty

bound to allo+ the free use of forest products +ithin the concession for the personal use

of individuals residin( in or +ithin the vicinity of the land. . . . &n other +ords, the

(overnent has practically reserved the ri(hts to use the road to proote its varied

activities. 5ince, as above sho+n, the road in 9uestion cannot be considered as an

iproveent +hich belon(s to appellee, althou(h in part is for its benefit, it is clear that

the sae cannot be the sub1ect of assessent +ithin the eanin( of 5ection of C.A.

No. %$.

Apparently, the realty tax +as not iposed not because the road +as an inte(ral part of the luber

concession but because the (overnent had the ri(ht to use the road to proote its varied activities.

". *en+ric v. -in aes Reservoir Co. (1// "acific 00/', an Aerican case, +here it +as declared

that the reservoir da +ent +ith and fored part of the reservoir and that the da +ould be /+orthless

and useless except in connection +ith the outlet canal, and the +ater ri(hts in the reservoir represent



and include +hatever utility or value there is in the da and head(ates./

%. ntario Silver Mining Co. v. 2i3on (1%/ "acific /$0', also fro the nited 5tates. This case

involved drain tunnels constructed by plaintiff +hen it expanded its inin( operations do+n+ard,

resultin( in a constantly increasin( flo+ of +ater in the said ine. &t +as held that?

;hatever value they have is connected +ith and in fact is an inte(ral part of the ine

itself. ust as uch so as any shaft +hich descends into the earth or an under(round

incline, tunnel, or drift +ould be +hich +as used in connection +ith the ine.

-n the other hand, the 5olicitor Deneral ar(ues that the da is an assessable iproveent because it

enhances the value and utility of the ine. The priary function of the da is to receive, retain and

hold the +ater coin( fro the operations of the ine, and it also enables the petitioner to ipound

+ater, +hich is then recycled for use in the plant.

There is also aple 1urisprudence to support this vie+, thus?

. . . The said e9uipent and achinery, as appurtenances to the (as station buildin( or

shed o+ned by Caltex 2as to +hich it is sub1ect to realty tax3 and +hich fixtures are

necessary to the operation of the (as station, for +ithout the the (as station +ould be

useless and +hich have been attached or affixed peranently to the (as station site or

ebedded therein, are taxable iproveents and achinery +ithin the eanin( of the

Assessent a+ and the Real Property Tax Code. 2Caltex FPhil.G &nc. v. CBAA, !!%

5CRA #73.

;e hold that +hile the t+o stora(e tan4s are not ebedded in the land, they ay,

nevertheless, be considered as iproveents on the land, enhancin( its utility and

renderin( it useful to the oil industry. &t is undeniable that the t+o tan4s have beeninstalled +ith soe de(ree of peranence as receptacles for the considerable 9uantities

of oil needed by MERAC- for its operations. 2Manila Electric Co. v. CBAA, !!%

5CRA "3.

The pipeline syste in 9uestion is indubitably a construction adherin( to the soil. &t is

attached to the land in such a +ay that it cannot be separated therefro +ithout

disantlin( the steel pipes +hich +ere +elded to for the pipeline. 2MERAC-

5ecurities &ndustrial Corp. v. CBAA, !!% 5CRA 7!3.

The tax upon the da +as properly assessed to the plaintiff as a tax upon real estate.

20lax8Pond ;ater Co. v. City of ynn, !7 N.E. %3.

The oil tan4s are structures +ithin the statute, that they are desi(ned and used by the

o+ner as peranent iproveent of the free hold, and that for such reasons they +ere

properly assessed by the respondent taxin( district as iproveents. 25tandard -il Co.

of Ne+ ersey v. Atlantic City, !* A d. !3

The Real Property Tax Code does not carry a definition of /real property/ and siply says that the



realty tax is iposed on /real property, such as lands, buildin(s, achinery and other iproveents

affixed or attached to real property./ &n the absence of such a definition, +e apply Article %!* of the

Civil Code, the pertinent portions of +hich state?

Art. %!*. The follo+in( are iovable property.

2!3 ands, buildin(s and constructions of all 4inds adhered to the soil@

xxx xxx xxx

2"3 Everythin( attached to an iovable in a fixed anner, in such a +ay that it cannot

be separated therefro +ithout brea4in( the aterial or deterioration of the ob1ect.

5ection of C.A. No. %$, other+ise 4no+n as the Assessent a+, provides that the realty tax is due

/on the real property, includin( land, buildin(s, achinery and other iproveents/ not specifically

exepted in 5ection " thereof. A readin( of that section sho+s that the tailin(s da of the petitioner

does not fall under any of the classes of exept real properties therein enuerated.

&s the tailin(s da an iproveent on the ineH 5ection "243 of the Real Property Tax Code definesiproveent as follo+s?

243 &proveents > is a valuable addition ade to property or an aelioration in its

condition, aountin( to ore than ere repairs or replaceent of +aste, costin( labor

or capital and intended to enhance its value, beauty or utility or to adopt it for ne+ or

further purposes.

The ter has also been interpreted as /artificial alterations of the physical condition of the (round that

are reasonably permanent in c#aracter./ 2

The Court notes that in the -ntario case the plaintiff aditted that the ine involved therein could notbe operated +ithout the aid of the drain tunnels, +hich +ere indispensable to the successful

developent and extraction of the inerals therein. This is not true in the present case.

Even +ithout the tailin(s da, the petitioner's inin( operation can still be carried out because the

priary function of the da is erely to receive and retain the +astes and +ater coin( fro the

ine. There is no alle(ation that the +ater coin( fro the da is the sole source of +ater for the

inin( operation so as to a4e the da an inte(ral part of the ine. &n fact, as a result of the

construction of the da, the petitioner can no+ ipound and recycle +ater +ithout havin( to spend for

the buildin( of a +ater reservoir. And as the petitioner itself points out, even if the petitioner's ine is

shut do+n or ceases operation, the da ay still be used for irri(ation of the surroundin( areas, a(ain

unli4e in the -ntario case.

As correctly observed by the CBAA, the Iendric4 case is also not applicable because it involved +ater

reservoir das used for different purposes and for the benefit of the surroundin( areas. By contrast, the

tailin(s da in 9uestion is bein( used e3clusively for the benefit of the petitioner.

Curiously, the petitioner, +hile vi(orously ar(uin( that the tailin(s da has no separate existence, 1ust



as vi(orously contends that at the end of the inin( operation the tailin(s da +ill serve the local

counity as an irri(ation facility, thereby iplyin( that it can exist independently of the ine.

0ro the definitions and the cases cited above, it +ould appear that +hether a structure constitutes an

iproveent so as to parta4e of the status of realty +ould depend upon the de(ree of permanence

inten+e+ in its construction an+ use. The expression /peranent/ as applied to an iproveent does

not iply that the iproveent ust be used perpetually but only until the purpose to +hich theprincipal realty is devoted has been accoplished. &t is sufficient that the iproveent is intended to

reain as lon( as the land to +hich it is annexed is still used for the said purpose.

The Court is convinced that the sub1ect da falls +ithin the definition of an /iproveent/ because it

is peranent in character and it enhances both the value and utility of petitioner's ine. Moreover, the

iovable nature of the da defines its character as real property under Article %!* of the Civil Code

and thus a4es it taxable under 5ection ") of the Real Property Tax Code.

The Court +ill also re1ect the contention that the appraisal at P*$.$$ per s9uare eter ade by the

Provincial Assessor is excessive and that his use of the /residual value forula/ is arbitrary anderroneous.

Respondent Provincial Assessor explained the use of the /residual value forula/ as follo+s?

A *$J residual value is applied in the coputation because, +hile it is true that +hen

slie fills the di4e, it +ill then be covered by another di4e or sta(e, the sta(e covered is

still there and still exists and since only one face of the di4e is filled, *$J or the other

face is unutili:ed.

&n sustainin( this forula, the CBAA (ave the follo+in( 1ustification?

;e find the appraisal on the land suber(ed as a result of the construction of the tailin(s

da, covered by Tax 6eclaration Nos.

$$8$7$ and $$8$77, to be in accordance +ith the 5chedule of Mar4et <alues for 5an

Marcelino, abales, +hich is fifty 2*$.$$3 pesos per s9uare eter for third class

industrial land 2T5N, pa(e !, uly *, !#)#3 and 5chedule of Mar4et <alues for

abales +hich +as revie+ed and allo+ed for use by the Ministry 26epartent3 of

0inance in the !#)!8!#) (eneral revision. No serious attept +as ade by Petitioner8

Appellant Ben(uet Corporation to ipu(n its reasonableness, i.e, that the P*$.$$ per

s9uare eter applied by Respondent8Appellee Provincial Assessor is indeed excessive

and unconscionable. =ence, +e find no cause to disturb the ar4et value applied byRespondent8Appellee Provincial Assessor of abales on the properties of Petitioner8

Appellant Ben(uet Corporation covered by Tax 6eclaration Nos. $$8$7$ and $$8

$77.

&t has been the lon(8standin( policy of this Court to respect the conclusions of 9uasi81udicial a(encies

li4e the CBAA, +hich, because of the nature of its functions and its fre9uent exercise thereof, has

developed expertise in the resolution of assessent probles. The only exception to this rule is +here



it is clearly sho+n that the adinistrative body has coitted (rave abuse of discretion callin( for the

intervention of this Court in the exercise of its o+n po+ers of revie+. There is no such sho+in( in the

case at bar.

;e disa(ree, ho+ever, +ith the rulin( of respondent CBAA that it cannot ta4e co(ni:ance of the issue

of the propriety of the penalties iposed upon it, +hich +as raised by the petitioner for the first tie

only on appeal. The CBAA held that this /is an entirely ne+ atter that petitioner can ta4e up +ith theProvincial Assessor 2and3 can be the sub1ect of another protest before the ocal Board or a ne(otiation

+ith the local sanggunian . . ., and in case of an adverse decision by either the ocal Board or the local

sanggunian, 2it can3 elevate the sae to this Board for appropriate action./

There is no need for this tie8+astin( procedure. The Court ay resolve the issue in this petition

instead of referrin( it bac4 to the local authorities. ;e have studied the facts and circustances of this

case as above discussed and find that the petitioner has acted in (ood faith in 9uestionin( the

assessent on the tailin(s da and the land suber(ed thereunder. &t is clear that it has not done so for

the purpose of evadin( or delayin( the payent of the 9uestioned tax. =ence, +e hold that the

petitioner is not sub1ect to penalty for its

non8declaration of the tailin(s da and the suber(ed lands for realty tax purposes.

;=ERE0-RE, the petition is 6&5M&55E6 for failure to sho+ that the 9uestioned decision of

respondent Central Board of Assessent Appeals is tainted +ith (rave abuse of discretion except as to

the iposition of penalties upon the petitioner +hich is hereby 5ET A5&6E. Costs a(ainst the

petitioner. &t is so ordered.


SUPREME COURT

Manila

5EC-N6 6&<&5&-N

G.R. No. '(0466 May 31, 19)2

CATE* +PIIPPINES- INC., petitioner,

vs.

CENTRA BOAR! O" ASSESSMENT APPEAS an% CIT& ASSESSOR O" PASA&,

respondents.

AUINO, J.:

This case is about the realty tax on achinery and e9uipent installed by Caltex 2Philippines3 &nc. in

its (as stations located on leased land.

The achines and e9uipent consists of under(round tan4s, elevated tan4, elevated +ater tan4s, +ater



tan4s, (asoline pups, coputin( pups, +ater pups, car +asher, car hoists, truc4 hoists, air

copressors and tireflators. The city assessor described the said e9uipent and achinery in this

anner?

A (asoline service station is a piece of lot +here a buildin( or shed is erected, a +ater

tan4 if there is any is placed in one corner of the lot, car hoists are placed in an ad1acent

shed, an air copressor is attached in the +all of the shed or at the concrete +all fence.

The controversial under(round tan4, depository of (asoline or crude oil, is du( deep

about six feet ore or less, a fe+ eters a+ay fro the shed. This is done to prevent

confla(ration because (asoline and other cobustible oil are very inflaable.

This under(round tan4 is connected +ith a steel pipe to the (asoline pup and the

(asoline pup is coonly placed or constructed under the shed. The footin( of the

pup is a ceent pad and this ceent pad is ibedded in the paveent under the shed,

and evidence that the (asoline under(round tan4 is attached and connected to the shed or

buildin( throu(h the pipe to the pup and the pup is attached and affixed to theceent pad and paveent covered by the roof of the buildin( or shed.

The buildin( or shed, the elevated +ater tan4, the car hoist under a separate shed, the air

copressor, the under(round (asoline tan4, neon li(hts si(nboard, concrete fence and

paveent and the lot +here they are all placed or erected, all of the used in the

pursuance of the (asoline service station business fored the entire (asoline service8

station.

As to +hether the sub1ect properties are attached and affixed to the teneent, it is clear

they are, for the teneent +e consider in this particular case are 2is3 the paveent

coverin( the entire lot +hich +as constructed by the o+ner of the (asoline station and

the iproveent +hich holds all the properties under 9uestion, they are attached and

affixed to the paveent and to the iproveent.

The paveent coverin( the entire lot of the (asoline service station, as +ell as all the

iproveents, achines, e9uipents and apparatus are allo+ed by Caltex 2Philippines3

&nc. ...

The under(round (asoline tan4 is attached to the shed by the steel pipe to the pup, so

+ith the +ater tan4 it is connected also by a steel pipe to the paveent, then to the

electric otor +hich electric otor is placed under the shed. 5o to say that the (asolinepups, +ater pups and under(round tan4s are outside of the service station, and to

consider only the buildin( as the service station is (rossly erroneous. 2pp. *)87$, Rollo3.

The said achines and e9uipent are loaned by Caltex to (as station operators under an appropriate

lease a(reeent or receipt. &t is stipulated in the lease contract that the operators, upon deand, shall

return to Caltex the achines and e9uipent in (ood condition as +hen received, ordinary +ear and

tear excepted.



The lessor of the land, +here the (as station is located, does not becoe the o+ner of the achines and

e9uipent installed therein. Caltex retains the o+nership thereof durin( the ter of the lease.

The city assessor of Pasay City characteri:ed the said ites of (as station e9uipent and achinery as

taxable realty. The realty tax on said e9uipent aounts to P%,*%!.!$ annually 2p. *, Rollo3. The city

board of tax appeals ruled that they are personalty. The assessor appealed to the Central Board of

Assessent Appeals.

The Board, +hich +as coposed of 5ecretary of 0inance Cesar <irata as chairan, Actin( 5ecretary of

ustice Catalino Macarai(, r. and 5ecretary of ocal Dovernent and Counity 6evelopent ose

RoKo, held in its decision of une ", !# that the said achines and e9uipent are real property +ithin

the eanin( of sections "243 L 23 and ") of the Real Property Tax Code, Presidential 6ecree No. %7%,

+hich too4 effect on une !, !#%, and that the definitions of real property and personal property in

articles %!* and %!7 of the Civil Code are not applicable to this case.

The decision +as reiterated by the Board 2Minister <icente Abad 5antos too4 Macarai('s place3 in its

resolution of anuary !, !#), denyin( Caltex's otion for reconsideration, a copy of +hich +asreceived by its la+yer on April , !##.

-n May , !## Caltex filed this certiorari petition +herein it prayed for the settin( aside of the

Board's decision and for a declaration that t he said achines and e9uipent are personal property not

sub1ect to realty tax 2p. !7, Rollo3.

The 5olicitor Deneral's contention that the Court of Tax Appeals has exclusive appellate 1urisdiction

over this case is not correct. ;hen Republic act No. !!* created the Tax Court in !#*%, there +as as

yet no Central Board of Assessent Appeals. 5ection 2"3 of that la+ in providin( that the Tax Court

had 1urisdiction to revie+ by appeal decisions of provincial or city boards of assessent appeals had in

ind the local boards of assessent appeals but not the Central Board of Assessent Appeals +hich

under the Real Property Tax Code has appellate 1urisdiction over decisions of the said local boards of

assessent appeals and is, therefore, in the sae cate(ory as the Tax Court.

5ection "7 of the Real Property Tax Code provides that the decision of the Central Board of

Assessent Appeals shall becoe final and executory after the lapse of fifteen days fro the receipt of

its decision by the appellant. ;ithin that fifteen8day period, a petition for reconsideration ay be filed.

The Code does not provide for the revie+ of the Board's decision by this Court.

Conse9uently, the only reedy available for see4in( a revie+ by this Court of the decision of the

Central Board of Assessent Appeals is the special civil action of certiorari, the recourse resorted toherein by Caltex 2Philippines3, &nc.

The issue is +hether the pieces of (as station e9uipent and achinery already enuerated are sub1ect

to realty tax. This issue has to be resolved priarily under the provisions of the Assessent a+ and

the Real Property Tax Code.

5ection of the Assessent a+ provides that the realty tax is due /on real property, includin( land,

buildin(s, achinery, and other iproveents/ not specifically exepted in section " thereof. This



provision is reproduced +ith soe odification in the Real Property Tax Code +hich provides?

5EC. "). 4nci+ence of Real "roperty -a3. > There shall be levied, assessed and collected

in all provinces, cities and unicipalities an annual a+ valorem ta3 on real property, such

as land, buildin(s, achinery and other iproveents affixed or attached to real

property not hereinafter specifically exepted.

The Code contains the follo+in( definitions in its section "?

43 4mprovements > is a valuable addition ade to property or an aelioration in its

condition, aountin( to ore than ere repairs or replaceent of +aste, costin( labor

or capital and intended to enhance its value, beauty or utility or to adapt it for ne+ or

further purposes.

3 Mac#inery > shall ebrace achines, echanical contrivances, instruents,

appliances and apparatus attached to the real estate. &t includes the physical facilities

available for production, as +ell as the installations and appurtenant service facilities,

to(ether +ith all other e9uipent desi(ned for or essential to its anufacturin(,industrial or a(ricultural purposes 25ee sec. "FfG, Assessent a+3.

;e hold that the said e9uipent and achinery, as appurtenances to the (as station buildin( or shed

o+ned by Caltex 2as to +hich it is sub1ect to realty tax3 and +hich fixtures are necessary to the

operation of the (as station, for +ithout the the (as station +ould be useless, and +hich have been

attached or affixed peranently to the (as station site or ebedded therein, are taxable iproveents

and achinery +ithin the eanin( of the Assessent a+ and the Real Property Tax Code.

Caltex invo4es the rule that achinery +hich is ovable in its nature only becoes iobili:ed +hen

placed in a plant by the o+ner of the property or plant but not +hen so placed by a tenant, ausufructuary, or any person havin( only a teporary ri(ht, unless such person acted as the a(ent of the

o+ner 26avao 5a+ Mill Co. vs. Castillo, 7! Phil $#3.

That rulin( is an interpretation of para(raph * of article %!* of the Civil Code re(ardin( achinery that

becoes real property by destination. &n the Davao Sa Mills case the 9uestion +as +hether the

achinery ounted on foundations of ceent and installed by the lessee on leased land should be

re(arded as real property for purposes of e3ecution of a 5u+gment against t#e lessee. The sheriff treated

the achinery as personal property. This Court sustained the sheriff's action. 2Copare +ith Machinery

L En(ineerin( 5upplies, &nc. vs. Court of Appeals, #7 Phil. $, +here in a replevin case achinery +as

treated as realty3.

=ere, the 9uestion is +hether the (as station e9uipent and achinery peranently affixed by Caltex

to its (as station and paveent 2+hich are indubitably taxable realty3 should be sub1ect to the realty tax.

This 9uestion is different fro the issue raised in the Davao Sa Mill case.

&proveents on land are coonly taxed as realty even thou(h for soe purposes they i(ht be

considered personalty 2)% C..5. !)!8, Notes %$ and %!3. /&t is a failiar phenoenon to see thin(s

classed as real property for purposes of taxation +hich on (eneral principle i(ht be considered



personal property/ 25tandard -il Co. of Ne+ or4 vs. araillo, %% Phil. 7"$, 7""3.

This case is also easily distin(uishable fro Board of Assessent Appeals vs. Manila Electric Co., !!#

Phil. "), +here Meralco's steel to+ers +ere considered poles +ithin the eanin( of para(raph # of its

franchise +hich exepts its poles fro taxation. The steel to+ers +ere considered personalty because

they +ere attached to s9uare etal fraes by eans of bolts and could be oved fro place to place

+hen unscre+ed and disantled.

Nor are Caltex's (as station e9uipent and achinery the sae as tools and e9uipent in the repair

shop of a bus copany +hich +ere held to be personal property not sub1ect to realty tax 2Mindanao

Bus Co. vs. City Assessor, !!7 Phil. *$!3.

The Central Board of Assessent Appeals did not coit a (rave abuse of discretion in upholdin( the

city assessor's is iposition of the realty tax on Caltex's (as station and e9uipent.

;=ERE0-RE, the 9uestioned decision and resolution of the Central Board of Assessent Appeals are

affired. The petition for certiorari is disissed for lac4 of erit. No costs.

5- -R6ERE6.


SUPREME COURT

Manila

EN BANC

G.R. No. '1/)/0 Sr 29, 1962

MIN!ANAO BUS COMPAN&, petitioner,

vs.

TE CIT& ASSESSOR 5 TREASURER an% BOAR! O" TA* APPEAS o7 Ca8ayan %

Oro Cy, respondents.

Binamira, Barria an+ 4rabagon for petitioner.

6icente 7. Sabellina for respon+ents.

ABRA!OR, J.:

This is a petition for the revie+ of the decision of the Court of Tax Appeals in C.T.A. Case No. !$

holdin( that the petitioner Mindanao Bus Copany is liable to the payent of the realty tax on its

aintenance and repair e9uipent hereunder referred to.

Respondent City Assessor of Ca(ayan de -ro City assessed at P%,%$$ petitioner's above8entioned

e9uipent. Petitioner appealed the assessent to the respondent Board of Tax Appeals on the (round

that the sae are not realty. The Board of Tax Appeals of the City sustained the city assessor, so



petitioner herein filed +ith the Court of Tax Appeals a petition for the revie+ of the assessent.

&n the Court of Tax Appeals the parties subitted the follo+in( stipulation of facts?

Petitioner and respondents, thru their respective counsels a(reed to the follo+in( stipulation of

facts?

!. That petitioner is a public utility solely en(a(ed in transportin( passen(ers and car(oes byotor truc4s, over its authori:ed lines in the &sland of Mindanao, collectin( rates approved by

the Public 5ervice Coission@

. That petitioner has its ain office and shop at Ca(ayan de -ro City. &t aintains Branch

-ffices andor stations at &li(an City, anao@ Pa(adian, aboan(a del 5ur@ 6avao City and

Iiba+e, Bu4idnon Province@

". That the achineries sou(ht to be assessed by the respondent as real properties are the

follo+in(?

2a3 =obart Electric ;elder Machine, appearin( in the attached photo(raph, ar4edAnnex /A/@

2b3 5tor Borin( Machine, appearin( in the attached photo(raph, ar4ed Annex /B/@

2c3 athe achine +ith otor, appearin( in the attached photo(raph, ar4ed Annex /C/@

2d3 Blac4 and 6ec4er Drinder, appearin( in the attached photo(raph, ar4ed Annex /6/@

2e3 PEMC- =ydraulic Press, appearin( in the attached photo(raph, ar4ed Annex /E/@

2f3 Battery char(er 2Tun(ar char(e achine3 appearin( in the attached photo(raph,

ar4ed Annex /0/@ and

2(3 68En(ine ;au4esha8M80uel, appearin( in the attached photo(raph, ar4ed Annex

/D/.

%. That these achineries are sittin( on ceent or +ooden platfors as ay be seen in the

attached photo(raphs +hich for part of this a(reed stipulation of facts@

*. That petitioner is the o+ner of the land +here it aintains and operates a (ara(e for its TP

otor truc4s@ a repair shop@ blac4sith and carpentry shops, and +ith these achineries +hich

are placed therein, its TP truc4s are ade@ body constructed@ and sae are repaired in a

condition to be serviceable in the TP land transportation business it operates@

7. That these achineries have never been or +ere never used as industrial e9uipents to

produce finished products for sale, nor to repair achineries, parts and the li4e offered to the

(eneral public indiscriinately for business or coercial purposes for +hich petitioner has

never en(a(ed in, to date.1ap#8l.n9t

The Court of Tax Appeals havin( sustained the respondent city assessor's rulin(, and havin( denied a

otion for reconsideration, petitioner brou(ht the case to this Court assi(nin( the follo+in( errors?



!. The =onorable Court of Tax Appeals erred in upholdin( respondents' contention that the

9uestioned assessents are valid@ and that said tools, e9uipents or achineries are iovable

taxable real properties.

. The Tax Court erred in its interpretation of para(raph * of Article %!* of the Ne+ Civil Code,

and holdin( that pursuant thereto the ovable e9uipents are taxable realties, by reason of their

bein( intended or destined for use in an industry.

". The Court of Tax Appeals erred in denyin( petitioner's contention that the respondent City

Assessor's po+er to assess and levy real estate taxes on achineries is further restricted by

section "!, para(raph 2c3 of Republic Act No. *!@ and

%. The Tax Court erred in denyin( petitioner's otion for reconsideration.

Respondents contend that said e9uipents, tho ovable, are iobili:ed by destination, in accordance

+ith para(raph * of Article %!* of the Ne+ Civil Code +hich provides?

Art. %!*. > The follo+in( are iovable properties?

x x x x x x x x x

2*3 Machinery, receptacles, instruents or ipleents intended by the o+ner of the teneent

for an industry or +or4s +hich ay be carried on in a buildin( or on a piece of land, and #ic#

ten+ +irectly to meet t#e nee+s of t#e sai+ in+ustry or ors. 2Ephasis ours.3

Note that the stipulation expressly states that the e9uipent are placed on +ooden or ceent platfors.

They can be oved around and about in petitioner's repair shop. &n the case of B. 2. Berenotter vs.

Cu :n5ieng, 7! Phil. 77", the 5upree Court said?

Article "%% 2No+ Art. %!*3, para(raph 2*3 of the Civil Code, (ives the character of real propertyto /achinery, li9uid containers, instruents or ipleents intended by the o+ner of any

buildin( or land for use in connection +ith any industry or trade bein( carried on therein and

+hich are e3pressly a+apte+ to meet t#e re;uirements of suc# tra+e or in+ustry./

&f the installation of the achinery and e9uipent in 9uestion in the central of the Mabalacat

5u(ar Co., &nc., in lieu of the other of less capacity existin( therein, for its su(ar and industry,

converted the into real property by reason of their purpose, it cannot be said that their

incorporation there+ith +as not peranent in character because, as essential an+ principle

elements of a sugar central, it#out t#em t#e sugar central oul+ be unable to function or

carry on t#e in+ustrial purpose for #ic# it as establis#e+. &nasuch as the central is

peranent in character, the necessary achinery and e9uipent installed for carryin( on the

su(ar industry for +hich it has been established ust necessarily be peranent. 2Ephasis

ours.3

5o that ovable e9uipents to be iobili:ed in conteplation of the la+ ust first be /essential and

principal eleents/ of an industry or +or4s +ithout +hich such industry or +or4s +ould be /unable to

function or carry on the industrial purpose for +hich it +as established./ ;e ay here distin(uish,



therefore, those ovable +hich becoe iobili:ed by destination because they are essential an+

principal elements in the industry for those +hich ay not be so considered iobili:ed because they

are merely inci+ental, not essential and principal. Thus, cash re(isters, type+riters, etc., usually found

and used in hotels, restaurants, theaters, etc. are erely incidentals and are not and should not be

considered iobili:ed by destination, for these businesses can continue or carry on their functions

+ithout these e9uity coents. Airline copanies use for4lifts, 1eep8+a(ons, pressure pups, &BMachines, etc. +hich are incidentals, not essentials, and thus retain their ovable nature. -n the other

hand, achineries of bre+eries used in the anufacture of li9uor and soft drin4s, thou(h ovable in

nature, are iobili:ed because they are essential to said industries@ but the delivery truc4s and addin(

achines +hich they usually o+n and use and are found +ithin their industrial copounds are erely

incidental and retain their ovable nature.

5iilarly, the tools and e9uipents in 9uestion in this instant case are, by their nature, not essential and

principle unicipal eleents of petitioner's business of transportin( passen(ers and car(oes by otor

truc4s. They are erely incidentals > ac9uired as ovables and used only for expediency to facilitate

andor iprove its service. Even +ithout such tools and e9uipents, its business ay be carried on, aspetitioner has carried on, +ithout such e9uipents, before the +ar. The transportation business could

be carried on +ithout the repair or service shop if its rollin( e9uipent is repaired or serviced in

another shop belon(in( to another.

The la+ that (overns the deterination of the 9uestion at issue is as follo+s?

Art. %!*. The follo+in( are iovable property?

x x x x x x x x x

2*3 Machinery, receptacles, instruents or ipleents intended by the o+ner of the teneent

for an industry or +or4s +hich ay be carried on in a buildin( or on a piece of land, and +hich

tend directly to eet the needs of the said industry or +or4s@ 2Civil Code of the Phil.3

Aside fro the eleent of essentiality the above89uoted provision also re9uires that the industry or

+or4s be carried on in a buil+ing or on a piece of lan+. Thus in the case of Berenotter vs. Cu

:n5ieng, supra, the /achinery, li9uid containers, and instruents or ipleents/ are found in a

buildin( constructed on the land. A sa+ill +ould also be installed in a buildin( on land ore or less

peranently, and the sa+in( is conducted in the land or buildin(.

But in the case at bar the e9uipents in 9uestion are destined only to repair or service the transportation

business, #ic# is not carrie+ on in a buil+ing or permanently on a piece of lan+ , as deanded by thela+. 5aid e9uipents ay not, therefore, be deeed real property.

Resuin( +hat +e have set forth above, +e hold that the e9uipents in 9uestion are not absolutely

essential to the petitioner's transportation business, and petitioner's business is not carried on in a

buildin(, teneent or on a specified land, so said e9uipent ay not be considered real estate +ithin

the eanin( of Article %!* 2c3 of the Civil Code.

;=ERE0-RE, the decision sub1ect of the petition for revie+ is hereby set aside and the e9uipent in



9uestion declared not sub1ect to assessent as real estate for the purposes of the real estate tax. ;ithout

costs.

5o ordered.


SUPREME COURT

Manila

T=&R6 6&<&5&-N

G.R. No. 90639 "ruary 21, 1990

TESTATE ESTATE O" CONCOR!IA T. IM, plaintiff8appellant,

vs.

CIT& O" MANIA, JESUS I. CAEJA, n : ;aa;y a: Cy Tra:urr o7 Man<a, NICOAS

CATII, n : ;aa;y a: Cy A::::or o7 Man<a, an%=or GO$ERNMENT SER$ICE

INSURANCE S&STEM, defendants8appellees.

Mel;uia+es ". De eon for plaintiff<appellant.

GUTIERRE#, JR., J.:

This is an appeal fro the decision of the Re(ional Trial Court of Manila, Branch # disissin( a

coplaint for a /su of oney andor recovery of real estate taxes paid under protest/ +hich +as

certified and elevated to this Court by the Court of Appeals as a case involvin( pure 9uestions of la+.-n 0ebruary !", !#7#, the late Concordia i obtained a real estate loan fro the defendant8appellee

Dovernent 5ervice &nsurance 5yste 2D5&53 in the aount of P)*,%)).*%, secured by a ort(a(e

constituted on t+o 23 parcels of land forerly covered by Transfer Certificates of Title Nos. 7%$* and

7"$7 2later chan(ed to TCT Nos. !*!) and !*!#3 re(istered in Manila +ith a three8story buildin(

thereon and located on No. )!$ Nicanor Reyes 5t. 2forerly Morayta3, 5apaloc, Manila. ;hen i

failed to pay the loan, the ort(a(e +as extra1udicially foreclosed and the sub1ect properties sold at

public auction. The D5&5, bein( the hi(hest bidder, bou(ht the properties. pon i's failure to

exercise her ri(ht of redeption, the titles to the properties +ere consolidated in favor of the D5&5 in

!#.

=o+ever, pursuant to Resolution No. !)) of the Board of Trustees of the D5&5 dated March #, !##,

the estate of i, throu(h Ernestina Crisolo(o ose 2the adinistratrix3 +as allo+ed to repurchase the

foreclosed properties. -n April !!, !##, a 6eed of Absolute 5ale +as executed. 2Exhibit B, Table of

Exhibits, pp. "8*3

The defendant City Treasurer of Manila re9uired the plaintiff8appellant to pay the real estate taxes due

on the properties for the years !#, !#) and the first 9uarter of !## in the aount of P7,#7$."#,



before the titles could be transferred to the plaintiff8appellant. The latter paid the aount under protest.

-n uly !!, !##, the plaintiff8appellants counsel sent a deand letter re9uestin( the D5&5 to

reiburse the taxes paid under protest. The D5&5 refused.

-n 5epteber 7, !##, a deand letter +as sent to the City Treasurer of Manila to refund the aount

but the latter also refused.

-n March !%, !#)$, the plaintiff filed an action before the trial court for a su of oney for the refund

or reiburseent of the real estate taxes paid under protest.

6urin( the pendency of the case, the plaintiff8appellant aditted that the foreclosed properties had been

sold, throu(h the adinistratrix, to another person. 2nd par. of Plaintiffs Manifestation dated

6eceber !, !#)!, Records, p. !$*@ T5N, March %, !#), p. "3

After trial, the lo+er court disissed the coplaint for lac4 of 1urisdiction. &t ruled that the case

involves a protested action of the City Assessor +hich should have been flied before the ocal Board of

Assessent Appeals of Manila 2citin( 5ection "$ of the Real Property Tax Code FP.6. No. %7%G3 in line

+ith the principle that all adinistrative reedies ust first be exhausted. The lo+er court also cited by

+ay of obiter +ictum, the case of City of Baguio v. Busuego, !$$ 5CRA !!7 2!#)$3 +herein this Court

ruled that +hile the D5&5 ay be exept fro the payent of real estate tax, the exeption does not

cover properties the beneficial use of +hich +as (ranted to other taxable persons. This rulin( supports

the lo+er court's vie+ that the tax had attached to the sub1ect properties for the years !#, !#) and

first 9uarter of !##. The lo+er court further stated that the plaintiff8appellant had assued liability for

the real estate taxes because of the provision in the 6eed of 5ale +ith the D5&5 that? /any and all the

taxes, ... relative to the execution andor ipleentation of this 6eed, ... shall be for the account of and

paid by the <EN6EE/ 2Exhibit B, Table of Exhibits, p. *3

=ence, this appeal raisin( several issues that can be sued up into the follo+in(? 2!3 +hether or not

the trial court has 1urisdiction over the action for refund of real estate taxes paid under protest@ 23

+hether or not plaintiff8appellant has the ri(ht to recover@ and 2"3 +hether or not the plaintiff8appellant

has personality to sue.

The plaintiff8appellant ar(ues that the lo+er court has 1urisdiction over a coplaint for refund as +ell

as for reiburseent of the real estate taxes erroneously collected by the City of Manila fro it and

paid under protest.

The records sho+ that the sub1ect properties +ere leased to other persons durin( the tie +hen D5&5

held their titles, as +as the case durin( the o+nership of the late Concordia i.

=o+ever, the real estate taxes later assessed on the said properties for the years !#, !#) and the first

9uarter of !## +ere char(ed a(ainst the plaintiff8appellant even if the latter +as not the beneficial user

of the parcels of land.

&n real estate taxation, the unpaid tax attaches to the property and is char(eable a(ainst the taxable

person +ho had actual or beneficial use and possession of it re(ardless of +hether or not he is the



o+ner. 25ections "2a3 and !# of P.6. No. %7%@ Province of Nueva Eci1a v. &perial Minin( Co., &nc.,

!!) 5CRA 7" F!#)G3. Raisin( doubts on the vali+ity of t#e imposition an+ collection of t#e real

property ta3 for the desi(nated periods before the title to the properties ay be transferred, the

plaintiff8appellant paid under protest. This step +as ta4en in accordance +ith the provision of 5ection

7 of P.6. No. %7%, +hich states?

5ec. 7. "ayment un+er protest. > 2a3 ;hen a taxpayer desires for any reason to pay histax under protest, he shall indicate the aount or portion thereof he is contestin( and

such protest shall be annotated on the tax receipts by +ritin( thereon the +ords paid

under protest.' <erbal protest shall be confired in +ritin(, +ith a stateent of the

(round, therefor, +ithin thirty days. The tax ay be paid under protest, and in such case

it shall be the duty of the Provincial, City or Municipal Treasurers to annotate the (round

or (rounds therefor on the receipt.

2b3 &n case of payents ade under protest, the aount or portion of the tax contested

shall be held in trust by the treasurer and the difference shall be treated as revenue.

2c3 &n the event that the protest is finally decided in favor of the (overnent, the aount

or portion of the tax held in trust by the treasurer shall accrue to the revenue account, but

if t#e protest s#all be +eci+e+ finally in favor of t#e protestant, t#e amount or portion of

t#e ta3 proteste+ against may eit#er be refun+e+ to t#e protestant or applie+ as ta3

cre+it to any ot#er e3isting or future ta3 liability of t#e sai+ protestant. 2Ephasis

5upplied3

The Court rules that the plaintiff8appellant correctly filed the action for refundreiburseent +ith the

lo+er court as it is the courts +hich have 1urisdiction to try cases involvin( the ri(ht to recover sus of

oney.

5ection "$ of the Real Property Tax Code is not applicable because +hat is 9uestioned is the iposition

of the tax assessed and +ho should shoulder the burden of the tax. There is no dispute over the aount

assessed on the properties for tax purposes. 5ection "$ pertains to the adinistrative act of listin( and

valuation of the property for purposes of real estate taxation. &t provides?

5ection "$. ocal Boar+ of Assessment Appeals > Any o+ner +ho is not satisfied +ith

the action of the provincial or city assessor in the assessent of his property ay, +ithin

sixty days fro the date of receipt by hi of the +ritten notice of assessent as

provided in this Code, appeal to the Board of Assessent Appeals of the province or city

by filin( +ith it a petition under oath usin( the for prescribed for the purpose, to(ether

+ith copies of the tax declarations and such affidavit or docuents subitted in support

of the appeal.

&n further support of the conclusion that the lo+er court has 1urisdiction to try the instant case, +e note

5ection 7% of the Real Property Tax Code +hich provides that a /court shall entertain a suit assailin(

the validity of a tax assessed/ after the taxpayer shall have paid under protest.



The issue on the existence or non8existence of the appellant's ri(ht to recover the aounts paid hin(es

on the basic 9uestion of the validity of the tax iposition. &f the iposition is valid and in accordance

+ith la+, then there is no ri(ht to recover. -ther+ise, the aounts paid ust be refunded by the

respondent City Treasurer of Manila actin( in his official capacity. 25ec. 7 FcG, P6 %7%3

The opinion of the lo+er court that the rulin( in City of Baguio v. Busuego, supra 1ustifies the

iposition of the tax on plaintiff8appellant is erroneous. The facts in that case are different fro thosein the case at bar. &t +as sho+n that Busue(o purchased, by +ay of installent, a parcel of land and

buildin( +ithin a housin( pro1ect of the D5&5. &n a Contract to 5ell +ith the D5&5, he a(reed to? 2!3 the

delivery of the possession of the properties to hi pendin( the full payent of the price althou(h the

title reained +ith the D5&5@ and 23 his liability to pay and shoulder all ta3es an+ assessments on t#e

lot an+ buil+ing or improvements t#ereon +uring t#e term of t#e contract to sell.

6espite the tax exeption en1oyed by the D5&5, the realty tax liability iposed on the purchaser +as

held to be valid on the basis of the contractual obli(ation that he entered into and the fact that beneficial

use had been (iven to hi.

The instant case does not present a siilar contractual stipulation. The contract here +hich is alle(ed to

include the condition that the buyer shall shoulder the taxes is a Contract of 5ale. &n the Busuego case,

there +as erely a Contract to 5ell for t#e +uration of #ic# the party +ho shall be liable for the taxes

about to be due is the buyer as per a(reeent. &n the case at bar, +hat +as assued by the vendee +as

the liability for taxes and other expenses /relative to the execution andor ipleentation/ of the 6eed

of Absolute 5ale /includin( aon( others, docuentation, docuentary and science staps, expenses

for re(istration and transfer of titles ... / This clause +as stipulated for the purpose of clarifyin( +hich

of the parties should bear the costs of execution and ipleentation of the sale and to coply +ith

Article !%) of the Civil Code +hich states?

ART. !%) > The expenses for the execution and re(istration of the sale shall be borne

by the vendor, unless there is a stipulation to the contrary.

Moreover, the taxes entioned in the clause here refer to those necessary to the copletion of the sale

and accruin( after the a4in( of such sale on April !!, !##$ such as docuentary stap tax and capital

(ains tax.

&n the Busuego case, the assuption by the vendee of the liability for real estate taxes prospectively due

+as in harony +ith the tax policy that the user of the property bears the tax. &n the instant case, the

interpretation that the plaintiff8appellant assued a liability for overdue real estate taxes for the periods

prior to the contract of sale is incon(ruent +ith the said policy because there +as no iediate transfer

of possession of the properties previous to full payent of the repurchase price.

The facts of the case constrain us to rule that the plaintiff8appellant is not liable to pay the real property

tax due for the years !#, !#) and first 9uarter of !##. The clause in the 6eed of 5ale cannot be

interpreted to include taxes for the periods prior to April !!, !##, the date of repurchase.

To ipose the real property tax on the estate +hich +as neither the o+ner nor the beneficial user of the



property durin( the desi(nated periods +ould not only be contrary to la+ but also un1ust. &f plaintiff8

appellant intended to assue the liability for realty taxes for the prior periods, the contract should have

specifically stated /real estate taxes/ due for the years !#,!#) and first 9uarter of !##. The

payents ade by the plaintiff8appellant cannot be construed to be an adission of a tax liability since

they +ere paid under protest and +ere done only in copliance +ith one of the re9uireents for the

consuation of the sale as directed by the City Treasurer of Manila.=ence, the tax assessed and collected fro the plaintiff8appellants is not valid and a refund by the City

(overnent is in order.

The Court rules, ho+ever, that the plaintiff8appellant is not entitled to a reiburseent fro the

respondent D5&5 because? 2!3 the D5&5 is exept fro payent of the real property tax under 5ec. ""

of the Revised Charter of the D5&5@ and 23 the tax should be based on /actual use/ of the property.

5ection %$ of the Real Property Tax Code supports the vie+ that not even the D5&5 is liable to pay real

property tax on public land leased to other persons. 5ection %$ provides?

5ec. %$. 73emption from Real "roperty -a3. > The exeption shall be as follo+s?2a3 Real property o+ned by the Republic of the Philippines or any of its political

subdivisions and any (overnent o+ned corporation so exept by its charter? Provided,

ho+ever, That this exeption shall not apply to real property of the abovenaed entities

the beneficial use of +hich has been (ranted, for consideration or other+ise, to a taxable

person.

&n fact, if there is anyone liable the la+ and applicable 1urisprudence point to the lessees of land o+ned

by the (overnent8o+ned and controlled corporations. 2Province of Nueva Eci1a v. &perial Minin(

Co., &nc., supra3 &n this case, the Court can only declare the non8liability of a ri(ht to a refund. ;e

cannot rule on the liability of the lessees +hose &dentities are not even clear because they +ere never

ipleaded.

The contention of the plaintiff8appellant that the respondent D5&5 is liable to reiburse the tax because

the latter alle(edly failed to exercise its clai to the tax exeption privile(e is +ithout erit. The

exeption is explicitly (ranted by la+ and need not be applied for.

Re(ardin( the issue on the existence of the personality to sue, the plaintiff8appellant asserts that since it

+as the one +hich paid under protest the aount of P7,#7$."# as real property tax, then it is the real

party in interest to sue for refund.

The lo+er court, notin( the transfer of the title to the properties to a third person, ruled that assuin(

ar(uendo that there is a ri(ht to see4 recovery, the subse9uent sale /ust have included the tax/ and /as

such all the credits includin( the taxes that +ere paid +as 2sic3 transfered already to the buyer./ &t ruled

that plaintiff8appellant had no personality to sue and the ri(ht of action ust be bet+een the subse9uent

buyer and the plaintiff8appellant. The Court finds that the above rulin( and the facts on +hich it is

based are not sufficiently supported by the records of the case. The evidence erely sho+s an

adission of a subse9uent sale of the properties by the plaintiff8appellant, nothin( ore.



;=ERE0-RE, &N <&E; -0 T=E 0-RED-&ND, the 1ud(ent appealed fro is hereby RE<ER5E6

and 5ET A5&6E. The defendants appellees City of Manila, the City Treasurer and City Assessor of

Manila are hereby ordered to refund to the TE5TATE E5TATE -0 C-NC-R6&A &M, throu(h

adinistratrix ERNE5T&NA CR&5--D-8-5E, the aount of P7,#7$."# as real estate taxes paid

under protest.

5- -R6ERE6.

EN BANC

>G.R. No. '24/69. "ruary 2(, 196/.?

$ICTORIAS MIING CO. INC., "etitioner, @. COMMISSIONER O" INTERNA RE$ENUE,ET A., Respon+ents.

>G.R. No. '24//9 "ruary 2(, 196/.?

COMMISSIONER O" INTERNA RE$ENUE, "etitioner, @. $ICTORIAS MIINGCOMPAN&, ET A., Respon+ents.

'24//9.

Car<o: B. <a%o 7or "etitioner.

So<;or Gnra< 7or Respon+ents.

'24/69.

So<;or Gnra< 7or "etitioner.

Car<o: B. <a%o 7or Respon+ents.

S&ABUS

!. C-N5T&TT&-NA A;@ TAOAT&-N@ &NTERNA RE<ENE C-6E@ 5ecs. !)"2b3 and !#$@

A6<ANCE 5AE5 TAO. > ;here su(ar ba(s and aterials +ere iported by a su(ar illin(copany and subse9uently used and disposed of by it as containers for the su(ar sold, the sae are notsub1ect to advance sales tax, since 5ec. !)"2b3 of the &nternal Revenue Code exepts expressly frosales tax those /articles sub1ect to tax under 5ec. !)# of this Code./ The payent by the illin(copany of the J tax iposed by section !)# on the (ross value in oney of all8su(ar anufacturedor illed by it, based on the ar4et value or actual sellin( price of the article at the tie it leaves thefactory or ill +arehouse, necessarily results in the exclusion fro sales tax of the value of the ba(s in+hich the su(ar is contained, there bein( no evidence that the price of the ba(s +as not included, orthat they are sold or char(ed separately fro the su(ar contained therein at the tie of sale.



Alternatively, if the price or ar4et value of the su(ar upon +hich the tax +as paid by the su(arcopany did not include that of the ba(s, then the ba(s +ere not sold by it and, therefore, there +as nosale of ba(s to be taxed, since no evidence exists on record that the su(ar copany received a separateconsideration for such ba(s. The rulin( in <ictorias Millin( Co. v. Coissioner of &nternal Revenue,8!!!, anuary "!, !#7 +here the issues tendered are identical to the case at bar is reiterated.

. &6.@ &6.@ TAO RE0N6 ;&T=-T &NTERE5T@ ARB&TRAR&NE55 6E0&NE6. > ;here salestax had been collected by the revenue authorities but subse9uently the Coissioner of &nternalRevenue ruled that the iportation +as exept fro such sales tax, the refund thereof should not bearinterest, inasuch as the ere fact of the reversal of a rulin( previously rendered is not per se evidenceof arbitrariness@ neither is the fact that the adinistrative rulin( is found by the courts not to be inaccordance +ith la+. Arbitrariness presupposes inexcusable or obstinate disre(ard of le(al provisions+hich, in this case, +e do not thin4 exists, the Coissioners holdin( bein(, to soe extent plausibleon the strict letter of the la+.

! E C I S I O N

RE&ES, J.B.., =.

0ro the decision of the Court of Tax Appeals in CTA Case No. !!$7 2<ictorias Millin( Co. v.Coissioner of &nternal Revenue3, declarin( that su(ar ba(s and aterials iported by the <ictoriasMillin( Co. fro 5epteber , !#*# to Au(ust 7, !#7$, and subse9uently used and disposed of by itas containers for the su(ar sold, +ere not sub1ect to advance sales tax and orderin( the Coissionerof &nternal Revenue to refund the su of P!*), 7#.7!, +ithout interest, both parties have appealed tothis Court. The issues tendered are identical to those posed in Case D.R. No. 8!!!, <ictorias Millin(Co. v. Coissioner of &nternal Revenue, decided on anuary "!, !#7.

The appeal of the Revenue Coissioner 2D.R. No. %#3 assails the decision of the Tax Court inre1ectin( his contention that the su(ar ba(s and containers +ere iported for sale and, as such, +eresub1ect to the payent of advance sales tax under sections !)" 2b3 and !#$ of the &nternal RevenueCode. This contention +as already overruled by this Court in the aforeentioned case 2D.R. No. 8!!!3 +here +e held that, since section !)) 2d3 of the Revenue Code exepts expressly fro salestax those /articles sub1ect to tax under section !)# of this Code/, the payent by the illin( copanyof the J tax iposed by 5ection !)#, on the (ross value in oney of all su(ar anufactured or illedby it, based on the ar4et value or actual sellin( price of the article at the tie it leaves the factory orill +arehouse, necessarily results in the exclusion fro sales tax of the value of the ba(s in +hich thesu(ar is contained, there bein( no evidence that the price of the ba(s +as not included, or that it ischar(ed or sold separately fro that of the su(ar contained therein at the tie of the sale. And +ereasoned out that, alternatively, if the price or ar4et value of the su(ar upon +hich the tax +as paid bythe su(ar copany did not include that of the ba(s, then the ba(s +ere not sold by it and, therefore,there +as no sale of ba(s to be taxed, since no evidence exists on record that the su(ar copanyreceived a separate consideration for such ba(s.

The ar(uent of the Coissioner that the exeption of the price of su(ar under section !)# of theRevenue Code can not include that of the ba(s or containers, because said section entions only theforer, but not the latter, does not ta4e into account that there is no proof that the su(ar copany



deducted the value of the ba(s or containers in reportin( the ar4et value or price of the su(ar it sold,for purposes of the tax under section !)#.

pon the other hand, the Millin( Copany appealed fro the Tax Courts decision in Case D.R. No. 8%7#, contendin( that the refund of the protested sales tax collected by the revenue authorities shouldhave been ordered +ith payent of interest thereon, for the reason that in rulin( that the ba(s and

aterials iported by said copany the Coissioner of &nternal Revenue +as (uilty of arbitrariness,since he had previously ruled that such iportations +ere exept fro sales tax. As +e haveconcluded in the precedin( case D.R. No. 8!!!, the ere fact of the reversal of a rulin( previouslyrendered is not per se evidence of arbitrariness@ neither is the fact that the adinistrative rulin( is foundby the courts not in accordance +ith la+. Arbitrariness presupposes inexcusable or obstinate disre(ardof le(al provisions, +hich, in this case, +e do not thin4 exists, the Coissioners holdin( bein(, tosoe extent, plausible on the strict letter of the la+.

;herefore, the decision of the Court of Tax Appeals, in its CTA Case No. !!$7, is affired. No costs.


SUPREME COURT

Manila

T=&R6 6&<&5&-N

G.R. No. '(3)20 une !*, !##

&AO A SIN TRA!ING, on% an% ora% y &AO A SIN, petitioner,

vs.

ONORABE COURT O" APPEAS an% PRIME DITE CEMENT CORPORATION,

rr:n% y : Pr:%n'Caran, CONSTANCIO B. MAAGNA, respon+ents.

&n !#", Constancio Ma(lana, president of Prie ;hite Ceent Corporation, sent an offer letter to ao

Ia 5in Tradin(. The offer states that Prie ;hite is +illin( to sell %*,$$$ ba(s of ceent at P%."$ per

ba(. The offer letter +as received by ao Ia 5ins ana(er, =enry ao. ao accepted the letter and

pursuant to the letter, he sent a chec4 in the aount of P%",$$$.$$ e9uivalent to the value of !$,$$$

ba(s of ceent. =o+ever, the Board of 6irectors of Prie ;hite re1ected the offer letter sent byMa(lana but it considered aos acceptance letter as a ne+ contract offer hence the Board sent a letter

to ao tellin( hi that Prie ;hite is instead +illin( to sell only !$,$$$ ba(s to ao Ia 5in and that he

has ten days to reply@ that if no reply is ade by ao then they +ill consider it as an acceptance and

that thereafter Prie ;hite shall deposit the P%"4 chec4 in its account and then deliver the ceents to

ao Ia 5in. =enry ao never replied.

ater, ao Ia 5in sued Prie ;hite to copel the latter to coply +ith +hat ao Ia 5in considered as



the true contract, i.e., %*,$$$ ba(s at P%."$ per ba(. Prie ;hite in its defense averred that althou(h

Ma(lana is epo+ered to si(n contracts in behalf of Prie ;hite, such contracts are still sub1ect to

approval by Prie ;hites Board, and then it still re9uires further approval by the National &nvestent

and 6evelopent Corporation 2N&6C3, a (overnent o+ned and controlled corporation because Prie

;hite is a subsidiary of N&6C.

=enry ao asserts that the letter fro Ma(lana is a bindin( contract because it +as ade under theapparent authority of Ma(lana. The trial court ruled in favor of ao Ia 5in. The Court of Appeals

reversed the trial court.

ISSUE ;hether or not the president of a corporation is clothed +ith apparent authority to enter into

bindin( contracts +ith third persons +ithout the authority of the Board.

E! No. The Board ay enter into contracts throu(h the president. The president ay only enter

into contracts upon authority of the Board. =ence, any a(reeent si(ned by the president is sub1ect to

approval by the Board. nli4e a (eneral ana(er 2li4e the case of 0rancisco vs D5&53, the president

has no apparent authority to enter into bindin( contracts +ith third persons. 0urther, if indeed the by8la+s of Prie ;hite did provide Ma(lana +ith apparent authority, this +as not proven by ao Ia 5in.

As a rule, apparent authority ay result fro 2!3 the (eneral anner, by +hich the corporation holds

out an officer or a(ent as havin( po+er to act or, in other +ords, the apparent authority +ith +hich it

clothes hi to act in (eneral or 23 ac9uiescence in his acts of a particular nature, +ith actual or

constructive 4no+led(e thereof, +hether +ithin or +ithout the scope of his ordinary po+ers. These are

not present in this case.

Also, the subse9uent letter by Prie ;hite to ao Ia 5in is bindin( because ao Ia 5ins failure to

respond constitutes an acceptance, per stated in the letter itself Q +hich +as not contested by =enry ao

durin( trial.

Tax II Cases_additional.doc

Documents

Transcript of Tax II Cases_additional.doc